[11i] comparison of standard and actual costs

ERP software generally has a variety of cost accounting methods to choose from, usually divided into two categories: Standard Cost Method and actual cost method. The actual cost method is generally divided into the moving weighted average method, the first-in-first-out method, and the second-in-first-out method. There are no advantages or disadvantages for each method. However, why do consultants often recommend standard costing? Why do some enterprises (especially state-owned enterprises) dislike the standard cost method? This is a problem that must be clearly explained.
The standard cost is advanced, and the actual cost is low. As mentioned above, there are no advantages or disadvantages between different methods. The reasons why most western companies adopt the standard cost are:
O § simple standard cost
O § Standard Cost Effectiveness
The standard cost is simple, which means the actual cost is complex.

It is true that the following businesses are encountered:
The inventory quantity of material A is 0. There are two purchase orders with the prices of RMB 1 and RMB 1.1 respectively. The total quantity is 100.
After the two orders arrive, material A is produced and consumes 160 items, and the remaining 40 items are in stock.
After the invoice is received, the price is slightly different, which is 1 yuan and 1.05 yuan respectively.

This is often the case. Let's take a look at how the standard cost and actual cost are processed. Assume that the initial balance of the relevant subject is 0.

First, let's look at the standard cost. First, let's assume that the standard cost of material A is 1 RMB. The entry is as follows:
Borrow: Inventory 100-Order 1
Loan: material procurement: RMB 100-Order 1
Borrow: Inventory 100-order 2
Borrow: procurement price difference 10-order 2
Loan: material procurement: RMB 110-order 2
The entries are as follows:
Borrow: Product 160
Loan: Inventory: 160
After receiving the invoice, the entries are as follows:
Borrow: Material Purchase: 100-Order 1
Loan: Payable 100-Order 1
Borrow: material procurement: 110-order 2
Loan: payable 105-order 2
Loan: purchase price difference 5-order 2
At this time, the balance of the relevant subjects is 40 in stock, 160 in work products,-205 in payable, 5 in difference in procurement price, and 0 in material procurement.

Let's look at the actual cost. The moving weighted average method is used as an example. The import time is recorded as follows:
Borrow: Inventory 100-Order 1
Loan: material procurement: RMB 100-Order 1
Borrow: Inventory 110-order 2
Loan: material procurement: RMB 110-order 2
The collection time is recorded as follows:
Borrow: Product 168
Loan: Inventory: 168
After receiving the invoice, the entries are as follows:
Borrow: Material Purchase: 100-Order 1
Loan: Payable 100-Order 1
Borrow: material procurement: 110-order 2
Loan: payable 105-order 2
Loan: Inventory 1
Loan: products 4
At this time, the balance of the relevant subjects is 41 in stock, 164 in work products,-205 in payable, and 0 in material procurement.

Compare the standard cost with the actual cost, and import business entries. There is only one price difference between the standard cost and the actual cost.
There is a difference in using business entries. The standard cost is very simple and I will not explain it.
How can we obtain the value of 168 in the moving weighted average method? Is 1.05x160 = 168.
How to obtain the unit cost of 1.05 is (1x100 + 1.1x100)/200 = 1.05.
It seems a lot more complicated. Looking at the Invoice Business entries, the standard cost only adjusts the price difference according to the invoice price, which is easy to understand. The moving weighted average law also makes it much more complicated to adjust inventory and work-in-process according to the materials used.

In the above example, although the actual cost is complicated, the computation formula can still be understood.
However, this is not always the case in the actual business activities of an enterprise. What if the finished product has been processed when the invoice is received and the finished product has been transferred out? What should I do if the finished product has been delivered when I receive the invoice? What should I do if some finished products are finished and delivered? What should I do if some materials are returned to the supplier?
The standard cost method is used to determine whether the finished product is finished or whether the finished product is delivered, whether the finished product is partially delivered or all, the business entries listed above are not changed, and the materials are returned to the supplier, you only need to reverse lending by the number of returned entries. There are a lot of daily businesses, and there is no change, it is very simple.
If you use the actual cost method, you need to consider how much additional sales cost, adjust the finished product inventory, the product inventory, and how to restore the product when returning the product. If it is first-in-first-out or later-in-first-out, you need to consider the batch. What should I do if I have more business than two or three times a day?
For enterprises that adopt the actual cost method, especially those that use manual accounting or financial software that simulates manual accounting, how many enterprises can calculate the cost by order, not all of which are collected on a monthly basis? This is caused by the complexity of the actual cost method.
The standard cost is valid, which means the actual cost is invalid. Where is it invalid? The cost control is invalid. Some people say that although I use the actual cost, it also sets the planned cost, which can reflect the deviation. Yes, you can know the deviation based on the planned cost. However, there is a premise that you first need to know how the actual cost is calculated, then compare the planned cost to determine the deviation of each required control point, such as the purchase price, material usage, labor, and so on. From the previous descriptions, we can see how you know the deviation between the finished product cost and the planned cost due to the raw material price difference and the material consumption difference. Due to the complexity of the computing process, many enterprises can only obtain the total number of months, but cannot detail specific services. As a result, few enterprises can achieve real control based on planned costs.

Excerpt to: http://www.itpub.net/viewthread.php? Tid = 1289692 & extra = & page = 1 #